You’d think a Harvard economics professor would be able to do better than invoke horizontal equity as the sole argument for reducing the U.S. inheritance tax.

But not Gregory Mankiw, who uses the silly parable of the Frugals and the Profligates to make his case for a low tax rate on the estates of the wealthiest 0.2 percent of Americans who actually owe any estate tax.*

I’ll leave it to readers to judge whether or not it’s worth spending the time to compose a column on a tax that affects such a tiny percentage of rich—very rich—American households. And then to argue not for raising the tax, but for lowering it.

Me, I want to raise a few, more general issues about how mainstream economists like Mankiw think about inheritance taxes.

First, Mankiw presents one principle—horizontal equity, the “equal treatment of equals”—and never even mentions the other major tax principle—vertical equity, the “unequal treatment of unequals,” the idea that people with higher incomes should pay more taxes. Certainly, on the vertical criterion, those who receive large inheritances (for doing nothing more than being born into and raised within the right family) should pay taxes at a much higher rate than those who do not.

Second, even the notion of horizontal equity—that equals must be treated fairly—depends on an assumption that we each have come fairly to where we now stand. If that principle is violated (as it often is, e.g., because an estate represents the accumulated wealth based on other people’s labor, their surplus labor), then we need to ask if there is even an a priori principle of horizontal equity. The alternative is to judge everyone’s entitlements and burdens, including those occasioned by large inheritances, according to a single theory of equity or justice.

Finally, and perhaps even more important, both the horizontal and vertical equity standards presume that tax justice can be achieved by minimizing the coercive relation between the citizen and the state, which is then counterposed to the freedom guaranteed by a system of voluntary exchange. As Paolo Silvestri explains,

if the problem of the legitimacy of taxation as coercion is posed in terms of ‘voluntary vs coercion’, or freedom vs coercion, the maximum that one can ask it is to minimize coercion and maximize possibilities for voluntary exchanges, and / or minimize the role and size of government and leave as much room as possible to the private sector.

The alternative, of course, is to imagine a very different economic and political relationship, one in which both exchange and taxation—and thus notions of freedom and obligation—are understood in terms of an alternative logic. Consider, for example, the gift. If there is indeed something that the literature on gift economies has revealed it is the fact that social reciprocity—literally, creating and reproducing social relationships through gift exchange—configures the relationship between freedom and obligation in a manner quite different from that presumed by Mankiw and other mainstream economists.

What Silvestri makes clear is the circulation of the gift involves the free recognition (or non-recognition) of the obligation or debt occasioned by the gift, “in the sense that human freedom is asserted as such at the very moment in which it recognizes (or not) his debt.” Taxation, in particular, can be represented as an act of “giving back” to society, the recognition of a relationship of living together beyond the family—which, while never finally solving the tension between obligation and freedom, creates and recreates relations of mutual trust and living in common. It thus redefines the issue of equal or unequal return—the accounting framework of giving and taking embedded in notions of horizontal and vertical equity—in favor of asymmetry and an unending cycle of producing and resolving instances of justice and injustice across society.**

To which the only possible answer is further giving—and thus the freedom of those who have managed to amass great fortunes to comply with the obligation, after they have died, to pay taxes at a high rate based on large accumulations of the social surplus.

*There are many other facts about the estate tax Mankiw conveniently leaves out (according to the Center on Budget and Policy Priorities): the effective tax rate is much lower than the statutory rate, only a handful of family-owned farms and businesses owe any estate tax, the largest estates consist mostly of “unrealized” capital gains that have never been taxed, most other rich countries levy some form of estate tax, and the estate tax is the most progressive part of the U.S. tax code.

**My concern here is with the inheritance tax. Silvestri takes his argument in a related but different direction: “the European economic crisis, the restrictive fiscal policies and their social consequences [that] have done nothing but to sharpen the citizen’s distrust in such legal-political institutions, increased their resentments, and even undermined the very possibility of a democratic discussion on taxes.”

Like this:

The environmental justice movement was born in 1979, when Hazel Johnson founded the People for Community Recovery in order to engage in serious and long overdue repair work in Altgeld Gardens, a Chicago Housing Authority development located on the South Side of Chicago.

Ms. Johnson dedicated years learning about urban environmental issues and networking with other environmental groups. After conducting her research, she learned that many waste disposal companies surrounded Altgeld Gardens as well as manufacturing companies that produced and emitted thousands of pounds of pollutants into the air, water and land. PCR found that due to the heavy concentration of industry, low income residential communities on the Southeast side of Chicago were being exposed to substantial amounts of toxic chemicals that could be responsible for negative health impacts.

Now, less than 10 miles away, in East Chicago, Indiana, the 1100 poor, mostly black residents of the West Calumet Housing Complex have learned that much of the soil outside their homes contains staggering levels of lead and arsenic. They’re now struggling to relocate to new homes (with a deadline of 1 November) after the mayor decided to raze the complex and the adjoining school.

The complex is home to mostly black residents and 670 children who have been playing in the grass that contains 19 times the maximum lead levels advised for bare soil in play areas. Parents in the complex are scrambling to test their children for lead poisoning as they also prepare to uproot their lives and leave their homes. . .

The complex is built just miles north of the USS Smelter and Lead Refinery, where lead and arsenic were used in industrial operations from the early 1900s until 1985. According to a report by the US Centers for Disease Control and Prevention, the areas within a half-mile north or northwest of the site were first referred to by the EPA as a potential Superfund site in 2004 as well as the actual USS Smelter location in 2006.

On top of that, the complex was literally on top of another smelting plant. The Anaconda lead smelter area was considered a lower priority due to its size. However, a letter from Copeland claims that when the Anaconda was demolished, it “may have simply been bulldozed, and that the West Calumet Housing Complex was then built on top of the demolition debris,” the Times of Northwest Indiana reported.

The double whammy of lead and arsenic contaminants had the EPA designate the area a Superfund site in 2009, meaning it became a high priority for the EPA to clean up.

However, a 2010 EPA report downgraded the urgency for the housing complex. The report found that because the numbers of children living with excessive blood lead levels had dropped and were “consistent with the national average.”

I’m taking nominations for the best examples of dismal economic scientists.

While I wait for your suggestions, I’m going to offer two of my own nominations: Tyler Cowen and Paul Romer.

I am nominating Cowen because, in his argument that the economy probably needs a “reset,” he only focuses on lowering workers’ wages. First, he makes no mention of resetting corporate profits or the incomes of those at the very top, as if what they manage to capture were completely off limits. All the adjustment in the new, “grimmer future” will be born by those at the bottom. Second, he completely overlooks the mechanisms of his own economic theory: if lower rates of economic growth are the product of lower rates of growth of available workers (a key factor in the theory of secular stagnation), then the relative scarcity of workers should mean higher—not lower—wages. In other words, Cowen is determined to make sure all the costs of the new, slower-growing economy will be born by shifted onto those who can least afford it. For that reason, I nominate Cowen for the title of dismal economist.

I also want to nominate Romer, who continues to double down on his “mathiness” argument, by asserting (against all the work that has taken place in the philosophy of science in recent decades) that (a) there’s a single truth, (b) that truth can only be obtained via science, and (c) mathematical modeling is the singular method for making progress in science to obtain truth. There are so many things wrong with each of those assertions it’s hard to know where to begin. And I won’t, at least right now. Let me just say Romer deserves his nomination as one of the most dismal economists because of the extraordinary arrogance, pretentiousness, and ignorance of the following statements:

About math:. . .I’ve seen clear evidence that math can facilitate scientific progress toward the truth.

If you think that math is worthless or dangerous, I’m sure that there are people who will be happy to discuss this with you. I’m not interested. I’m busy.

About truth and science: My fundamental premise is that there is an objective notion of truth and that science can help us make progress toward truth.

If you do not accept this premise, I’m sure that there are people who would be happy to debate it with you. I’m not interested. I’m busy.

And please do not write to tell me that science is a social process or that the progress it makes toward the truth can be irregular. I know.

Me, I’m not too busy to discuss either the fundamental injustices of contemporary capitalism or the often-worthless and dangerous role mathematics, truth, and science have played and continue to play in the discipline of economics.

I’m also not too busy to post additional nominations for dismal economists.

Like this:

Rest in Peace to Michael Brown and to every young black man murdered in America, whether by the hands of white or black. I pray that one day the world will be filled with peace and rid of injustice. Only then will we all Be Free.

Like this:

The right-wing loves to talk about the injustice of passing on the tax burden of current deficit spending to our children and grandchildren. What they don’t want to discuss is how unfairly the children of today are being treated.

Right now, the next generation is getting shortchanged all around, with children too often treated as an afterthought in policies meant to appeal to their elders. The United States tolerates the highest rate of child poverty in the developed world. Yet federal expenditures on children — including everything from their share of Medicaid and the earned-income tax credit to targeted efforts like child nutrition and education programs — fell 1 percent last year and will fall an additional 4 percent this year, to $428 billion, according to estimates by the Urban Institute based on the Congressional Budget Office’s projections.

The federal government spent $8 billion less on child health last year than it did the previous year, as fiscal stimulus programs to combat the Great Recession were phased out. It cut aid to states to pay for primary education by about the same amount.

The states, which provide more than 60 percent of the total government dollars spent on children, aren’t in great shape either. According to the Urban Institute’s estimates, state and municipal spending on children fell in each of the last three years.

And the outlook is not much better for the coming decade. Despite health care reform, which will lead to coverage for millions of uninsured children, the Urban Institute forecasts that federal expenditures on children — including direct spending and tax breaks — will shrink to about 2.3 percent of the nation’s economic output by 2022, from 3 percent last year.